Here’s what to do once you have your property ensconced safely inside that IRA.
When you hold a property in your IRA, all expenses relating to it must be paid from funds in that IRA. This means you’ll need some liquidity in the account. Any income generated from the property will be deposited in the IRA, so that money can be used to cover associated costs. And don’t forget you can continue to contribute $3,000 annually to a traditional or Roth IRA. That number goes up to $3,500 if you’re at least 50 years of age. The numbers get even better if you’re self-employed with a SEP-IRA. Fall into the latter category and you can contribute up to 15% of your annual compensation, up to $40,000 per year.
SEP merely stands for Simplified Employment Pension and is the most popular IRA for the self-employed.
However you do it, make sure you have funds in your IRA to pay property expenses. Otherwise, you’ll have to withdraw it from your IRA and pay taxes on the value as well as possible penalties for early withdrawal.
Did you know you can sell property held within your IRA? True statement, as long as the purchaser is not a family member. The proceeds from the sale will be deposited into the IRA, where they sit readily available for your next investment. You can also finance your IRA property sale to a buyer and have the monthly mortgage payments paid to your IRA.
Are you starting to see the possibilities with this method of investing?
Flickr / CarbonNYC
